Great Falls Tribune
January 16, 2009
SME responds to suit against Yellowstone co-op By KARL PUCKETT Tribune Staff Writer
The court shouldn't allow a disgruntled member to break its ties with a coalition of rural electric cooperatives that teamed up in 2003 to buy cheap power, attorneys for that coalition said in court filings this week.
"When you are on a board, the majority rules, and you own that decision," said Gary Zadick, an attorney for Southern Montana Electric Generation & Transmission attorney.
In December, Yellowstone Valley Electric Cooperative filed a lawsuit against SME in Yellowstone County District Court. Cooperative leaders are seeking to sever ties with SME, saying they have been ostracized by the coalition's other members since they questioned the financial feasibility of building a coal-fired power plant east of Great Falls.
SME officials deny they treated the Yellowstone cooperative unfairly, and lodged counterclaims in their response to the lawsuit. The company's response was filed Wednesday.
"You can't decide midway through you are going to do something else," Zadick said.
The lawsuit has publicly aired behind-the-scenes dealings of the rural electric cooperatives that otherwise might have gone unnoticed if not for the proposed Highwood Generating Station, which garnered keen public interest from supporters and opponents of the project.
The outcome of the lawsuit is significant because Yellowstone Valley, the state's second-largest rural cooperative, accounts for about 36 percent of the power purchased through SME. The coalition purchases power on the market now but would generate its own electricity if the Highwood plant is built, and the Yellowstone cooperative, although not a partner, is slated to be a major buyer. The co-op serves about 14,500 rural Billings residents.
SME has secured short-term financing for the Highwood plant project, but still is working on arranging long-term funding.
"What we'd like to do is lower the risk and lower our power costs going into the future," said Brandon Wittman, assistant general manger for Yellowstone Valley. "That's really what we're after with this lawsuit issue. As far as what the options are out there, we don't know yet."
SME allowed Yellowstone to opt out of the Highwood plant project, but the cooperative remains under contract to purchase power from SME until 2030, Zadick said.
In its response to the lawsuit, SME asked the court to declare the wholesale contract valid, and award the coalition punitive damages.
The response also states that Yellowstone Valley has paid its power bills late, and asks the court to direct the co-op "to honor its monthly power bill" as stipulated under the wholesale contract.
Wittman acknowledged that there were times when Yellowstone Valley paid its power bills late but said those bills eventually were paid, including penalties.
SME also contends that Yellowstone intentionally tried to hurt SME's chances to secure financing for the proposed power plant.
The response cites the timing of the filing of the lawsuit in December, for example, alleging that Yellowstone Valley officials knew the suit would be publicized the same day a potential lender was meeting with SME officials to discuss financing the project.
In its suit, Yellowstone Valley asks the court for a refund of its contribution toward the Highwood project, which Wittman said is $7 million to $8 million, in addition to refunding the equity and deposit contributions the co-op made to SME.